Impending federal hemp ban puts North Carolina’s $1B industry at risk – Port City Daily
NORTH CAROLINA — A sweeping change tucked into the federal government’s latest funding package is poised to wipe out most of North Carolina’s hemp industry, banning nearly all cannabinoid products and leaving farmers and retailers across the state facing an uncertain future.
READ MORE: Hemp under threat: NC lawmakers debating crackdown, business owners push back
ALSO: NC legislators propose recreational marijuana bills in Senate and House
Under a provision tucked into the bill, most hemp-derived products sold in North Carolina — including Delta-8, Delta-10 and THCA flower — will become illegal by November 2026. The change rewrites the federal definition of hemp to exclude cannabinoids that are synthesized or modified outside the cannabis plant, closing loopholes that fueled the rise of these products and effectively wiping out the retail market that now dominates the state’s industry.
The measure was folded into the 394-page Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act of 2026 — the funding package which ended the 43-day federal government shutdown when it was signed into law Nov. 12.
Although the restrictions do not take effect until the end of next year, the language marks a major shift in national cannabis policy. Championed by Sen. Mitch McConnell (R-KY), the provision aims to close gaps left by the 2018 Farm Bill, which defined hemp solely by its Delta-9 THC concentration.
McConnell justified the ban by citing rising public-health incidents, pointing to statistics from the Kentucky Poison Center showing cannabis-related calls more than doubled over five years. Nearly 40% of the center’s THC-related calls in 2024 involved children under 12, with most hospitalizations linked to THC gummies marketed in packaging resembling candy.
The 2018 Farm Bill allowed hemp to be grown and sold so long as it contained no more than 0.3% Delta-9 THC by dry weight. Because the federal definition focused on just one cannabis compound, manufacturers exploited two glaring omissions. The first was the law ignored other psychoactive compounds like Delta-8 and Delta-10 THC, which are chemically similar to Delta-9 and produce a high for users.
Delta-8 and Delta-10 THC compounds can be created by extracting CBD — which is non-intoxicating — from hemp and chemically converting it into a psychoactive substance. The second gap in the Farm Bill was the law’s failure to regulate THCA (tetrahydrocannabinolic acid), the raw, non-intoxicating compound found in hemp flower. THCA becomes illegal Delta-9 THC only when heated, meaning retailers could legally sell flower functionally identical to cannabis sold in dispensaries in states where the drug is legalized.
Any cannabinoid synthesized or manufactured outside the cannabis plant is explicitly removed from the definition of legal hemp, outlawing most Delta-8 and Delta-10 products, along with many of the processes used to isolate and refine CBD.
The legislation also imposes an extremely strict limit on finished consumer products: anything intended for human consumption will be illegal if the container holds more than 0.4 milligrams of total THC. Commonly consumed low-dose gummies typically contain 5 to 10 milligrams of THC per gummy so a standard package of 10 gummies containing 50 to 100 milligrams of total THC, rendered illegal under the new law.
According to Phil Dixon Jr., professor at the UNC School of Government and expert in cannabis law, the new federal language represents a “radical reworking of the federal definition of hemp to effectively eliminate everything but hemp oils and hemp seeds.”
He said the law is so broad because it doesn’t just target finished intoxicating products, it criminalizes many of the processes used to make otherwise legal hemp extracts. Widely sold CBD products often require extracting and isolating cannabis compounds which results in THC byproducts. Under the new definition, the process could make the entire product unlawful. Thus, non-intoxicating CBD items — gummies, oils, and lotions — would also fall under the ban.
“I think it will drastically shrink the market all around and there will be way less products that are legal under federal law,” Dixon said. “That presumably means less people will be doing it, and there will be less of a supply all around and so less demand from the producers and the farmers.”
Dixon described the federal drafting as “pretty airtight,” noting Congress appears to have erred on the side of “over-inclusion,” sweeping in Delta-8, THCA, and newer compounds such as Hexahydrocannabinol (HHC) to ensure no future chemical workaround remains possible.
HHC, a semi-synthetic cannabinoid, often derived from CBD, is believed to fall under the ban because the law excludes any cannabinoids “synthesized or converted” outside the plant.
Focusing on intoxicating products, the federal ban does not target agricultural hemp grown for fiber, grain, textiles, or industrial uses. However, it is still expected to affect the farming sector because the high-profit consumable cannabinoid market largely subsidizes the much lower-value industrial hemp market.
North Carolina has 858 licensed hemp growers, according to state agriculture licensing records. A 2023 economic impact study on the state’s hemp industry estimated the sector supports nearly 9,000 jobs and generates between $759 million and $1.1 billion in annual sales, with the majority of revenue coming from hemp-derived cannabinoid products.
Earlier this year, state lawmakers attempted to regulate hemp with House Bill 328, which proposed age limits, testing requirements, and a product licensing system. Though it had strong support from the hemp industry — due to creating standards without banning products — it didn’t move forward. Senate lawmakers rewrote the bill into a much stricter measure mirroring the new federal approach, banning intoxicating hemp-derived cannabinoids, restricting chemical conversion processes used to make Delta-8 and similar products, and limiting total THC in consumer goods. Negotiations between the chambers ultimately stalled.
Industry organizations such as the American Healthy Alternatives Association have opposed the new federal language, contending an outright ban on intoxicating hemp cannabinoids will shutter small businesses and eliminate a profitable industry.
Despite the lack of regulation, hemp retailers continued to expand across the state, with more than 100 businesses operating in North Carolina. Wilmington alone now has dozens of hemp dispensaries, smoke shops, vape shops, and convenience stores selling THCA flower and Delta-8 and Delta-10 THC products permitted under the 2018 Farm Bill. Under the new federal restrictions, hemp consumable stores will soon face decisions about whether to shut down, liquidate stock, attempt to pivot to non-intoxicating products, or risk federal enforcement after November 2026.
Dixon emphasized that even if some businesses hope to continue selling products under North Carolina’s permissive state laws they will face multiple obstacles.
Because the new federal definition makes most hemp products controlled substances, banks will be legally unable to accept proceeds from sales. Hemp producers, wholesalers, and retailers would also be unable to ship products across state lines, disrupting the supply chain. In addition, businesses would be subject to federal controlled-substance tax provisions normally applied to illicit drug operations.
“Even putting aside the risk of a criminal prosecution by the feds, there are these very practical problems, like: Can you ship it? Can you get a bank account for your business?” Dixon said. “If this is your business, are you exposed to some new and different tax liability because of this change? I think all of those are very possible.”
Dixon noted federal enforcement remains unpredictable. While the Department of Justice has not prioritized raids on state-licensed marijuana dispensaries in places like Colorado, the protection these businesses enjoy is not permanent. It exists only because of a Congressional provision attached to a federal spending bill — known as a budget rider — preventing the use of federal funds to take action against state-compliant marijuana operations. Since a budget rider must be renewed annually by Congress, the shield could be removed at any time. No such agreement currently exists for hemp.
Marijuana and hemp remain legally distinct substances at the federal level — marijuana is defined as any cannabis with more than 0.3% Delta-9 THC, while hemp is defined as anything under that limit. Even if North Carolina were to legalize recreational or medical marijuana, Dixon said it would not resolve the conflict for hemp specific businesses.
“Us changing our marijuana laws wouldn’t really change this,” he said. “Perhaps there could be a similar kind of agreement that says, ‘If you’re operating consistent with your state law, we’re not going to mess with you.’”
In the coming year, Dixon expects some hemp businesses will begin phasing out operations or selling off inventory, while others may hold out in hopes the legal landscape changes.
“My assumption is that you will see businesses starting to wind down the closer we get to November,” he said. “But I also imagine that there will be people who hold out and say, ‘I’m committed to this industry. I think I do good work, and I think there’s a market for my products.’ We’ll just have to see. If I was their attorney, I would say you need to be concerned.”
Have tips or suggestions for Charlie Fossen? Email charlie@localdailymedia.com
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